Jeremy Hunt is reportedly considering increasing the house price cap on Lifetime ISAs.
Under current rules, funds from a Lifetime ISA going towards the first property are only available if the property is worth £450,000 or less.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “A change to the LISA price cap would be incredibly welcome.
“Increases in illegal house prices over the last five years have made the £450,000 limit much less generous than it was in 2018.
“While you can still stretch out to the average property in the UK (which costs £291,000), Londoners will find the average house well out of reach at £536,000.”
Funds from a Lifetime ISA can only be used to buy a property below the price ceiling or can be accessed after the person turns 60.
If a person wants to use their savings for another purpose, for example buying a first home worth more than £450,000, they will have to pay a 25 per cent penalty on withdrawal.
Ms Coles said the penalty policy should also be changed and reduced to 20 per cent.
There are also reports that the Government is considering creating a new ISA product to help first-time buyers save money.
Ms Coles warned against this, saying: “If the plan is to simplify and streamline the range, adding more different types of ISAs risks introducing another layer of complexity.
“LISA has helped more than 171,000 people get on the property ladder by supporting £2bn of deposits. It has also helped millions of thousands of people start their savings and investment journey, helping them create habits that will help them build resilience over the long term.
“This is nothing to sneeze at. There is no need for the Treasury to throw out the baby with the bathwater. Some adjustments to LISA will give a huge advantage to anyone saving for property or retirement.”
The Lifetime ISA provides the significant benefit that for any amount a person saves, the Government matches this with a 25 per cent bonus.
A person can deposit up to £4,000 into a Lifetime ISA each tax year and receive a maximum bonus of £1,000 each year.
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